Home/Glossary/Supply and demand zones
Home/Glossary/Supply and demand zones
Technical analysis

Supply and demand zones

By Jarosław Wasiński • Published: • Updated:
Chart regions identified under a rule as potential reaction areas, often around consolidation preceding a strong move. Supply and demand names express an interpretation, not a measurement of global orders or participant counts. Define boundaries, freshness and invalidation. Revisits do not guarantee one particular response.
Example. After consolidating at 1.0980–1.1000, EUR/USD rises to 1.1040. A rule can label the base a demand zone and permit a first revisit within 12 bars. OHLC alone does not show whether unfilled orders remain there or whether a later touch will rebound.

A zone is a model

Supply or demand labels commonly describe an area preceding a strong movement. They do not establish that buyers outnumbered sellers: each executed trade has both sides. Pressure concerns willingness to transact at particular prices, among other factors, and a few bars from one feed cannot reconstruct that process fully.

Boundaries, freshness and expiry

Record base selection, bodies or wicks, minimum departure, waiting horizon and invalidation. “Fresh” can mean no touch after identification but proves no remaining order inventory. Revisit count is a feature to evaluate; weakening after every touch is not a certain law. Zones selected using later reactions introduce retrospective information.

Reaction and complete result

A touch, movement away and profit after execution are separate events. Define which is evaluated, at what price and over which horizon. Compare with simpler support/resistance without selecting only attractive departures. Include untouched and failed zones according to the predeclared sample rule, with timing and costs rather than a narrative about presumed institutional interest.

FAQ

Does a candle reveal orders left in the zone?
No. It does not show global order inventory or participant intentions.
Does every revisit necessarily weaken the zone?
No. That relationship needs evaluation, not assumption.

← Back to the full glossary

Jarosław Wasiński

Editor-in-chief, ForexMechanics.com • Macro & FX analyst

Independent analyst and practitioner with over 20 years of experience in financial markets. Actively involved in Forex since 2007, with a focus on fundamental analysis, OTC market structure, and disciplined capital risk management.

  • Creator and editor-in-chief of MyBank.pl, providing reliable financial education since 2004.
  • Author of hundreds of in-depth market commentaries, structural analyses, and educational materials for traders and investors.
  • Advocate for market transparency, promoting education grounded in hard data and institutional reports (BIS, ESMA, CFTC).

All content is educational and informational only – it does not constitute investment advice or a recommendation. Remember: leveraged trading (Forex/CFD) carries a high risk of rapid capital loss.